Insourcing - A Breakdown

Outsourcing has remained an integral aspect of striking deals between engineering and design firms. While it has been growing at a solid pace each year, several companies have taken the route to insource a part of their formerly outsourced services portfolio.

Insourcing is the practice of assigning a task to an individual or group inside a company. The work that would have been contracted out is performed in house. 

Insourcing is entirely opposed to outsourcing where the work is contracted outside. Insourcing encircles any work assigned to an individual, team, department or other groups within an organization. It is a task or function that a firm could also outsource to a vendor, being directed in-roads. It often involves getting specialists with relevant expertise to fill temporary needs or train existing professionals to execute tasks without the need to outsource the same. The group of professionals could either be direct employees of the organization or hired expertise from outside third party vendors.

A perfect example can be put in this way – a company based in India opens a plant in the United States and employs American workers to work on Indian products. From the Indian perspective, this is outsourcing, but from the American perspective, it is insourcing.

Causes of Insourcing

The leading reasons for insourcing include:

  • A management mandate to make changes in corporate sourcing strategy
  • To provide a remedy for a turbulent outsourcing relationship
  • To obtain the right mix of in-house and outsourced services based on current business goals
  • Mergers and acquisitions can also influence insourcing decisions. A decent post-acquisition integration plan should include a common sourcing strategy between the two companies, which may ask for the outsourcing of functions that are in-house at one company and the insourcing of a task that was previously outsourced at the other
  • Insourcing enables companies to have control over decision-making and the ability to move more quickly and precisely
Reasons to Insource
  • Boosting business agility
  • Transformation needs secure integration with the business
  • Knowledge is now available and increasingly democratized
  • Cybersecurity threats
  • Providing a platform to nurture talent

While executing an insourcing project can be achieved, it is essential to know that insourcing a service can be more complicated than outsourcing the same. The transition may require rebuilding services and leveraging capabilities from ground level that were once wholly owned by the service provider, which can turn out to be more complicated than expected.